Recap VNG Connect No.2/2022

I. BUSINESS ACTIVITY REVIEWS IN Q1 2022 & OVERALL STRATEGY FOR Q2

1/ GENERAL UPDATES
– VNG Cloud: Anh Minh will temporarily assume the CEO VNG Cloud position. At the same time, Cloud business will be repositioned as one of the long-term investment business segments.
– VNG currently has three main business segments: Games, Zalo and ZaloPay. Long-term investment products include VNG Cloud, trueID and Prism.
– From July, Anupam will officially take on the role of CEO of ZaloPay.

a. Market updates:
– 2022 continues to be a year of volatility and instability with many headwinds and economic recession. Large tech companies are facing the major phase of employment reduction and pause in temporary hire in the past 20 years.
– VNG believes in the country’s stable development, thanks to the responsive policies from the government. Vietnam’s economic outlook reassures us in the face of world uncertainties, but we still approach it with caution.

b. Business updates:
– The spirit of VNG in the second half of 2022 is “Stay Lean”. For unnecessary spending, staffs should actively suspend or postpone during this period.
– Games business slowed down in the first half of the year. Other business segments have confidence in increasing their growth rate.
– We have great belief in our ability. This period is not particularly difficult but we need to be careful as we don’t know how the global headwinds may affect the country, which is now the rare bright spot.

2/ GAME ENTERTAINMENT
a. General updates
GE today is a truly global operation aiming to build up a global business. Today we have over 193 starters from overseas offices which are Thailand, Philippines, Indonesia, Taiwan Malaysia and Beijing, many which have joined us during COVID.

From the industry perspective, we are seeing a slowdown in growth post COVID, which have seen revenue growth across the region slow (but still grow).

On the plus side we see a lot of opportunities to expand our footprint and invest in resources that were previously scarce and expensive.

Globally, we are seeing the world return to a new normal as people are now back to the office (including our teams), traveling and enjoying more offline activities. GMT looks forward to getting to all our offices overseas and visiting everyone over the next few months.

b. GE Publishing
We had a slower start this year versus last year but we still managed to launch 3 S level games this year.
– GS2 launched Gunny Origin out in early June which reached SSS levels.
– The Taiwan team launched Azure in May and achieved S level
-The Thailand team launched YS across several markets in May, the game reached S level in Thailand as well.
About our investment in Haegin, the developer for Play Together, this was an interesting deal, implemented by MBD team, where we were able to make an investment in company, and we also managed to get the publishing rights for Play Together in Vietnam. It launched at the end of June and GS9 migrated the player base across to VNG Games version successfully. It’s still early but the NRU and DAU look very promising.

c. GIP – Global Intellectual Property
Galaxy Studio formally is a development studio setup by VNG Games. As part of our 2332 strategy and commitment to invest into more content and IP, we have officially established a studio lead by TengHe. He has a lot of experience in managing development and has joined us with a core team of 8 experienced veterans of game development. They will be based in Beijing and have already moved into our new offices there.

d. ZingPlay Game Studios
Building a Portal Ecosystem based on the metaverse concept: This will launch in late 2022, but the idea is that they will be able to create a 3D environment for ZingPlayers to socialize, play games and of course express their unique personalities through avatars.
Expanding new markets: The team travelled to Dubai, Brazil and Argentina over the last few months to conduct focus groups to better understand the player base to refine their games.

e. Overall Financials
We’re taking this as a lesson and focusing on game launches in the 2H2022 which will expect the results to be better as we have some key cross country titles launching.
Based on our re-forecast, we should be ahead of last year but will update everyone more during the next connect.
From a player base perspective, we lost some ground in terms of MAU, but this was offset with a group of new players from Play Together.

3/ ZALO
Zalo has increased by 1 million users during the second quarter of 2022, with a 4% growth YoY. We still see growth YoY, especially calling grows by 50% for the number of calls and 25% for the duration of calls.

Regarding the new function, Zalo has launched end-to-end encryption for all users in Q2. At the same time, Zalo has plans to improve the platform to ensure the app’s core values of speed, stability, and security. For business customers, We were testing the Zalo business account and also upgraded Zalo Official Account to a new version for paid businesses.

Regarding the media cluster, the number remains stable in Q2 Zalo still invests in media products, especially content development. Notably, 95% of the latest songs released on the market are ready on ZingMP3, compared to 97% in June.

Regarding AI and Kiki projects, Kiki’s strategy is to occupy DVD players in cars. Currently, we are working with eight hardware developers to apply Kiki to cars. The number of vehicles using Kiki in the second quarter has tripled compared to the first quarter and is reaching 50% of the 2022 plan.

4/ ZALOPAY
a. 3 main KPIs of ZaloPay this year:
Focusing primarily on Users Base: 55% of users are active on the app, 61% of those who make payments on the app (pays users), the number of points accepting ZaloPay payment reached 74% of the target.

Financial Services have been developed this year and launched the Accumulation Account product. Currently, 4% of users of ZaloPay have started using the product, although ZaloPay does not have a competitive interest rate compared to other platforms such as Momo, Finhay. In addition, in the third quarter, one more product will be launched, then two products will be released in the fourth quarter.

ZaloPay focus on the ability to launch products on the market as quickly as possible while ensuring the quality of the application demonstrated by 2 main indicators that are the ability to create products (deliver) reaching more than 40% and product testing before market (automated test coverage) reached 56%.

b. Accumulation Account
– The number of deposit users is increasing gradually
– The amount of savings (assets under management) is also increasing steadily.
Year-end KPI is increasing to 10% number of active users (NAU).

c. Merchant coverage
– The number of users paying merchant side of ZaloPay increased compared to the previous year. 18% increase from the previous quarter.
– The big merchants ZaloPay brought into the ecosystem in Q2: Gongcha, Katinat, Passio, Concung, Chuk-chuk, Trung Son. And in the second half of 2022, Starbucks, Pizza Hut, Fpt Long Chau, and MWG will be officially welcome to ZLP’s merchant system.

d. User Activation and retention
In H2, ZaloPay will have following goals:
– Recommend steps that work best for each user’s use case.
– Enable tutorials for users.
– Calling old users to return to use.

Loyalty Program:
– Reach 15% number of active users (NAU) after launching the program.
– In the near future, ZaloPay will launch a casual game for users to experience.

5/ TSE
a. Information security
– In the first half of 2022, regarding Security Compliance, ISO 27001 certificate for 5 products was obtained. To date, 80% of the company’s products have met security standards.
– In the near future, ISO will coordinate with C&B, IT helpdesk, etc. to instruct Starter on – – Security Awareness during the probationary period as well as on annual updates.
– Security Tech sharing was organized for Starter at Tech positions.

b. myVNG for experience enhancement
MyVNG is a fully initiated and developed application by VNG’s IT team. Thanks to this application, Starter can find everything about VNG, including:
+ Register Zalo FaceID to remove card usage at Campus
+ Search the meeting room’s location and status.
+ Connect with colleagues and groups easily.
+ Follow news and events at VNG in the user’s preferred language.

c. TSE team’s products
– Products developed by TSE: new versions of the applications in the IoT ecosystem (Access control, Lighting Control, Camera, Storage) were introduced at Campus. In the future, those products will be deployed at the new Datacenter and for the IoT ecosystem’s customers.
– Development of the demo version of Wallet and NFT marketplace.

d. Support for BU
– In the previous quarter, TSE’s improved the process to support departments more effectively.
– Orientation to promote digital services esite, cloud, etc.

6/ FINANCE AND ACCOUNTING
We continue to grow revenues as a group, despite all the headwinds. It important to highlight that we are clearly a little bit behind budget for the first half of 2022.

We have clearly budgeted for the impact to a net profit line, which was a loss of VND194 billion for the first half of 2022. It is actually still ahead of same time last year. It is well ahead of the budget that we set for 2022. It is also a function of everyone to try to be very judicious in terms of the spend that we invested in H1. So I really encourage all of us to continue to be sensible and try balance risk and reward in the coming months.

We continue to have a very strong balance sheet. As a company well-positioned, we aim to be safe and secure, but also to capitalise on all the opportunities that we are seeing across all the various businesses for 2022 so far, as well as in the upcoming months.

7/ HUMAN RESOURCES
Quarter 2 of 2022 is quite a successful quarter for the Human Resources team with the following outstanding figures:

a. Recruitment
– 425 new employees (accounting for 81% of the organization’s demand), including 37 foreign employees, 18 employees from Level 3, and 183 collaborators & interns.
– The above-mentioned achievement was attributed to all Starters in the ERP program, which reached 30% of the total approached candidates, increasing by 10% compared to last year.
– 11% of former employees rejoined VNG, increasing by 3% compared to last year.
– Referral for the Head of Engineering position will soon be launched in the “Who wants to be a millionaire” format. The member who successfully introduces a candidate for this position will be awarded VND 100,000,000.

b. Updates on HR rights
– Health care package for relatives (Spouse, children)
+ Level 2: quantity 1
+ Level 3: quantity 1
+ Level 4.1: quantity 2
– Multilingual mental health counseling/care center: hotline 18001789

c. Recognition Program
– List of most active BU in the program according to records: PY (42%), CLS (28%), Zalo (15%)
– Hopefully in the near future, all Starters can access this program and participate.

d. Human development
The HR team is focusing on building a learning culture at all levels and training a professional management team. Some results can be seen in the second half of 2022 as follows:
+ Tech Leader training program for PY
+ First line manager program for the entire VNG with four sessions, of which 3 in Vietnam and 1 in Thailand.
+ Training programs for Freshers
+ E-Learning continues developing
+ Library refurbishment for service enhancement.

e. Coaching Program
– HR is working hard to build the Coaching community within VNG in order to bring the learning culture closer to internal members and inspire talents outside of VNG.
– Update on the program’s eligibility: Level 2.2 onwards can join VNG’s Coaching team.

f. New library
– New tool for book search. Expected to be released in September
– 2 newly built reading places in the meeting room area outside the main hall and atrium
– Update many different forms of reading, in addition to traditional books with Kindle and E-books
– Add 500 different titles, especially books about Tech

g. Performance Management
– Regularly update and check work efficiency and goals on DrawingBox

h. “Great Place To Work” Award
– VNG will participate in the Great place to work prize, which is a globally recognized award.
– The survey on VNG’s workplace quality will be officially sent to Starter on August 2, revolving around five factors “Trust – Prestige – Fairness – Pride – Respect”. Looking forward to your answers.

8/ ADMINISTRATION AND FACILITIES
We’ve increased three offices around the world, up our presence to 9 countries and numbers of Starters to approximately 4500.

a. Achievement in the last 3 months:
– New restaurant Morico Box in the canteen area
– VNG Family Day
– Blood donation

b. Expecting achievement in the next 3 months:
– Atrium Hall (Knowledge garden) and library
– Data Center (Office and Canteen)
– Upgrading F&B services and facilities

Exciting front for AF and IOT is a new product called PRISM that helps digitalise solution/platform that assists users in centralising their architecture and service to increase resource efficiency and bringing convenient digital solution to all aspects of life.

PRISM is on development. Two current customers: Masan (the new head office will use the facility and rollout towards the end of the year), Mitek (5000 employees and will use the different aspects of Prism as well). Our emphasis over the next 6 to 12 months will be to increase the reach of product. Prism has two areas, one of which is automated architecture. So basically we are trying to connect the users to the facility itself and make the facility more intelligent.

On the mobility side is, public transportation. We’re working together with the transportation department and other providers to increase reaches, from the buses taxis, water taxis, and other means of transportation to the city.

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